ME firms to boost investment in key projects

Manama, December 15, 2012

Investment in major projects remains positive despite challenging economic conditions both globally and in the Middle East, according to a new survey.

A total of 66 per cent of respondents reported spending over $100 million on major projects in 2012 across a broad range of industry sectors, with 72 per cent expecting to increase their spending in 2013, the Gulf Daily News, our sister publication reported citing the survey by PwC entitled "Delivering the Middle East's Mega Projects."

The report also sheds light on project financing issues, including funding constraints, perception of private financing and the funding outlook for 2013.

Despite regular project reporting and structured review regimes, the number of participating respondents experiencing performance issues relating to their capital projects was high.

Around 80 per cent of respondents said that their projects had experienced a delay, with 46 per cent saying that they had suffered delays in excess of six months.

Completing projects on budget was also a significant issue, with only 36 per cent of respondents saying that their projects were completed on or under budget.

However, respondents also said that their projects were subject to regular reporting and review.

"Governance, accuracy and completeness of reporting will dominate the areas of focus of senior management for 2013," said PwC in the Middle East partner Charles Lloyd.

"Whilst reporting is regular, there appear to be concerns around its transparency and accuracy."

Another issue facing projects in the Middle East is the availability of funding for major projects. More than half of respondents said that their projects had been delayed, scaled down or cancelled due to funding constraints.

"Furthermore, two in three respondents expect restrictions to continue into 2013 and more than 60 per cent of respondents expect their projects to be funded, at least in part, by the private sector.

Export credit agencies, local banks, development banks and Islamic finance are now active considerations for sponsors looking to fund infrastructure projects.

Such alternative funding sources, however, give rise to different challenges and financing considerations including hedging, inter-creditor issues and appropriate risk allocation.-TradeArabia News Service